What is a merchant cash advance?
A merchant cash advance (MCA) is an advance of cash repaid through a fixed percentage of your daily card or bank takings — typically 10%–20% of daily revenue. The total cost is expressed as a factor rate: a multiplier applied to the advance amount to determine the total repayment.
Common MCA providers in the UK include Liberis, YouLend, Capify, and Capital on Tap (via their card product). MCAs are embedded in many payment platforms including Shopify, Amazon, and Zettle.
What is a revolving credit facility?
A revolving credit facility is an approved credit limit that a business can draw from, repay, and draw again — repeatedly, without reapplying. Interest is charged at a monthly rate on the outstanding balance only. Repaying early always reduces the total cost.
multifi Flexi Credit is a revolving credit facility from £10,000 to £350,000 for established UK limited companies. Interest starts from 1.99% per month on drawn funds only. Zero fees of any kind.
Side-by-side comparison
| Feature | Revolving Credit Facility (multifi Flexi Credit) | Merchant Cash Advance (typical) |
|---|---|---|
| Pricing model | Monthly interest rate on drawn balance | Factor rate — fixed multiplier on advance |
| Cost basis | Time-based — repay early, pay less | Fixed total — repaying early saves nothing |
| Repayment method | Fixed monthly amount — known in advance | % of daily revenue — varies every day |
| Impact of good performance | Lower total cost — interest stops sooner | Higher effective APR — repaid faster |
| Cashflow forecasting | Easy — fixed monthly repayment | Difficult — repayment varies daily |
| Facility amount | £10,000 – £350,000 | Typically based on monthly card takings |
| Fees | Zero setup, platform, draw, or early repayment fees | Factor rate includes all costs — not always disclosed separately |
| Revolving / repeat access | Automatic reload at 66% repaid | New advance required — new factor rate applied |
| Regulatory status | FCA regulated via Modulr FS Ltd, FRN 900573 | Not all MCA providers are FCA regulated |
| Requires card payments | No — Open Banking based | Typically yes — repayment via card terminal |
| Min. trading required | 12 months | Often 3–6 months |
The real cost: a worked example on £30,000
Scenario: £30,000 needed for 6 months
Merchant Cash Advance at 1.25 factor rate:
Total repayment: £37,500 (fixed)
Cost: £7,500
Effective APR at 6 months: ~66%
If repaid in 4 months: Effective APR ~116%
Early repayment saves: nothing
multifi Flexi Credit at 2.49% per month:
Monthly repayment: approximately £5,532
Total cost over 6 months: approximately £3,195
Effective APR: ~32%
Cost saving vs MCA: approximately £4,305
The daily sweep problem
MCA repayments are collected as a percentage of daily card or bank takings — typically 10%–20%. On a busy Saturday trading day, a retail business might take £8,000 and see £1,200–£1,600 swept immediately by the MCA provider. This cash is gone before the business can use it to restock, pay a supplier, or cover payroll.
This is sometimes described as a "cash flow shock at peak trading" — the business performs well, but the MCA sweep removes the working capital benefit of that strong day almost immediately. multifi's fixed monthly repayment on the 8th of each month means your daily trading revenue is yours until repayment day.
Regulation and protection
Not all merchant cash advance providers are FCA regulated. Revenue-based finance and merchant cash advances can fall outside the scope of FCA credit regulation in certain forms, which means borrowers may have fewer rights when disputing terms or seeking redress. multifi is regulated via Modulr FS Limited (FRN 900573) — an FCA-authorised Electronic Money Institution.
When might an MCA make sense?
An MCA can be appropriate for businesses that:
- Cannot meet the eligibility criteria for an RCF (e.g., less than 12 months trading)
- Have highly volatile revenue and want repayments that automatically reduce in slow periods
- Process high volumes of card payments and have an embedded MCA offer at a low factor rate
- Need very fast access to a small amount of cash for a specific short-term purpose
For established businesses with predictable revenue, a revolving credit facility is almost always a cheaper and more transparent alternative.
The bottom line
Merchant cash advances are often the most expensive form of business finance available — and the factor rate model means that high-performing businesses pay the highest effective cost. A revolving credit facility charges interest only on outstanding funds, means repaying early always saves money, provides predictable fixed repayments for cashflow planning, and is regulated by the FCA.
If your business meets multifi's eligibility criteria — UK limited company, 12 months+ trading, £120,000+ annual turnover — a revolving credit facility is almost certainly a lower-cost and more transparent option than a merchant cash advance.
Frequently asked questions
What is a merchant cash advance and how does it work?
A merchant cash advance is a lump-sum advance repaid as a percentage of daily card or bank revenue. The cost is expressed as a factor rate — a fixed multiplier on the advance amount. Total repayment is fixed regardless of repayment speed. Repaying early does not reduce the cost.
Is a merchant cash advance or revolving credit facility cheaper?
For most established businesses, a revolving credit facility is significantly cheaper. MCA factor rates translate to effective APRs of 30–166%+ depending on repayment speed. multifi Flexi Credit charges interest only on drawn funds at a monthly rate — repay early and the cost falls immediately.
What are the risks of a merchant cash advance?
Key risks: fixed total cost regardless of early repayment; daily revenue sweeps can strip working capital at peak periods; effective APR often significantly higher than the factor rate implies; not all MCA providers are FCA regulated. A revolving credit facility from an FCA-regulated lender provides more predictable costs and clearer protections.